Income Tax, Schedule D – Profits of trade – Deduction – Vendor’s debts paid by purchasers of business to maintain goodwill – Income Tax Act, 1918 (8 and 9 Geo. V, c. 40), Schedule D, Cases I and II, Rule 3.
The agreement by which the Respondent firm purchased a shoe repair business provided that the vendor should discharge all liabilities of the business outstanding at the date of sale. The vendor failed to do so, and the Respondents, in order to preserve the goodwill and to ensure continuity of supplies of material, etc., paid certain sums in discharge of the vendor’s liabilities.
On appeal against an assessment to Income Tax under Case I of Schedule D, the General Commissioners held that the sums so paid by the Respondent firm were wholly and exclusively laid out for the purposes of its business and were not capital expenditure and were, therefore, allowable deductions for Income Tax purposes.
Held, that the Commissioners’ decision was correct.
Judges:
Croom-Johnson, J
Citations:
[1949] EWHC KB 1, [1949] 30 TC 460
Links:
Jurisdiction:
England and Wales
Income Tax
Updated: 26 September 2022; Ref: scu.681188
